Frankfurt, Germany — Not long ago, Germany's second-largest newspaper group, WAZ, made what many saw as a seismic decision. Citing financial pressures, it severed its long-time ties with the German Press Agency, DPA. Instead, it vowed to get its news more cheaply by renewing its contract with France's Agence France-Presse only.

For the Westdeutsche Allgemeine Zeitung publications, which reach 2.9 million readers in the country's' most populous state of North Rhine Westphalia, the decision was sound economic thinking. It meant saving $2.7 million and preserving the jobs of 25 journalists.

But editors at Germany's main wire service, DPA, say losing such a formidable client will have consequences on journalism.

The spat between the French and German news agencies is part of a growing crisis hitting Europe's ailing newspaper industry and highlights differences over the role of government in supporting the press.

At the heart of the tension is a clash of systems, with an independent agency, DPA, accusing a ­government-subsidized rival, France's AFP, of unfairly luring clients with artificially low prices. Some in Germany say it's time for their government to support DPA.

"If the press can't fulfill its public function anymore, we have to think about state aid or some sort of broadcasting regulatory model," Dieter Grimm, a former judge, said recently.

Editors of the WAZ group say that not one reader canceled his or her subscription since the DPA wire reports were dropped. Yet the papers' depth of German-based coverage has become undeniably more shallow.

"Journalism culture – the whole media culture in this country – is going to be affected," Mr. Wilke says.

Christiane Schulzki-Haddouti, a Bonn-based investigative reporter and creator of a media-watchdog Internet forum, adds. "The German press agency calculates its prices based on everybody participating. When a major client goes away, it becomes more expensive for all the others."

Frankfurt-based Peter Zschunke, author of a German-language book on news-agency journalism, fears that journalism is increasingly driven by the bottom line. He also says that newspapers must now make difficult decisions in order to survive. "Newspapers are under huge cost pressures," he says, "and they have to have the freedom to say, 'This is too expensive for us.' "

Whatever the reason, WAZ's favoring French AFP over German DPA has brought attention to how France – unlike Germany – subsidizes its newspaper industry.

Europe's news juggernaut

With memories of the Hitler regime still fresh, Hamburg-based DPA was established in 1949 as an independent entity. It is collectively owned and financed by subscribers. With 40 percent of its revenues – €108 million ($150 million) in 2009 – coming from the state, France's AFP receives more financial support than any other news agency, experts say. With 2,000 journalists, it's the third-largest, after Reuters and AP, and is also considered the world's fastest-growing news agency.

"If Berlin gave us €108 million, we could give our services for free," DPA's Michael Segbers told a German television magazine.

If that wasn't enough, just as charges of unfair competition against France's AFP were beginning to swirl, French President Nicolas Sarkozy unveiled a €600 million ($845 million) aid package to the press, including free newspaper subscriptions for young adults.

"An independent press is one of the most precious and useful tools for our democracy," President Sarkozy said in January. "We have to do everything in our power to defend it."

Many editors praised the move. But others said it would only reinforce a French pattern of government interference in media independence.

In many nations (including Britain, Canada, and Australia), thousands of journalists are on the government payroll as employees of state-owned public broadcasters performing a "public service" mission. Governments also indirectly subsidize newspapers through discounted postage rates (as in the United States), or a zero value-added tax (Britain).

With €1.4 billion ($2 billion) from Paris this year, the French newspaper industry is Europe's most subsidized. More than half of the subsidy goes toward alleviating postal costs.

The price of government support?

Government support of the press dates to the 1630s, when France's Cardinal Richelieu paid for the distribution of the country's first paper, La Gazette. Today, it hinges on the principle of fostering a diverse press, says Jean Marie Charon, a media researcher at the National Center for Scientific Research (CNRS) in Paris. "The French aid system doesn't at all take into account the content of the press," he says. "No aid is attributed according to editorial content."

The problem of the French system of aid to the press, Charon and others say, is that, "Little by little, anytime that we stumbled upon a time of crisis, the tendency was to turn to the government." When advertising revenues plummeted in 1997, for instance, Paris intervened. When modernizing the press meant firing workers, the government covered expensive buyouts.

Unlike other sectors hard hit by the current economic crisis, the newspaper troubles started well before the markets collapsed. The cash infusion could only delay the profound rethinking needed to keep journalism strong.

"It's as though the aid package is feeding a system that isn't very healthy economically," says Charon, adding that giving a newspaper for free to an 18-year-old isn't going to entice him or her to buy the newspaper more often. "It's only going to slow down, never counter, the adjustments that need to be done."